Contractors' Questions: Can I bring forward when my company pays me?
Contractor’s Question: As a limited company director who takes a salary each month, can I pay myself early, on Wednesday September 20th, for example, instead of the last day of the month as I usually would? From October, I will be returning to the last day of the month as pay day. Do I need to do anything in my accounts to reflect this one-off adjustment?
Expert’s Answer: There are a couple of things you can do to help you manage your personal cash flow. One is to follow accounting rules and best practice, and the other is to think more laterally -- as you seem to be.
The first option is to move your payday and bring it forward to a different day of the month and pay yourself earlier than you normally would. But there are a couple of accounting principles you need to think about as you do this. If the new payday will fall in the same tax month, you should treat the new payment as an extra payment for that period.
However, it sounds as though your preference is to move your payday forwards slightly from the end of the month to the 20th of the month. If that is the case, then as both dates fall within the same tax month, you don't need to do anything special when recording the pay. Remember, the tax month for PAYE runs from 6th on one month to the 5th of another, so the next tax month is 6th September to 5th October.
If you use a payroll provider, then you should contact them as soon as possible to let them know you want to change the pay day. Your accounts will only need to be adjusted if the payday you choose falls after the company’s accounting period end, but relates to work carried out within the accounting period.
The second option is to consider taking a director’s loan from the company until the payroll runs at the end of the month and then using the next salary to repay the loan.
The expert was James Poyser, co-founder of contractor accountancy firm inniAccounts.